eLease Equipment Leasing

Why do I like the small lease for the small business?   Today’s economy is all about impressive big numbers. Everywhere you turn there is always someone throwing around a big number. What I think some people forget is that a lot of smaller #’s create those bigger numbers.

We funded a transaction for an entrepreneur today who had been using an old telephone system for over 2 years that was completed outdated. Like most business owners, he was concerned about cash flow. We financed his $3,595.00 system the same day with payment of $126.00 per month on our Equipment Finance Agreement program.

The business was very small but had big plans and I like to think we are part of his future success.

The Definition of the Equipment Finance Agreement

An EFA is a fixed-term obligation with equal monthly payments, where the borrower is the owner of the equipment and the lender has a security interest in the equipment. The borrower deducts as a business expense both the depreciation on the equipment and the interest portion of the monthly payment.    A lessor may use an EFA, and act as the lender, when the borrower has already taken delivery of, and has paid for, the equipment.

We started offering EFAs in 2005 and we have had tremendous success with them over the last 2 years. I consider the EFA as a $1.00 lease on steroids because it is giving you the same tax benefits as a normal lease but has more flexibly to pay it off early. When we finance equipment for our office we use this type of financing.

Let us know if you have any questions on this type of agreement.

Every company needs a limousine right? Well, maybe not every company but a country club that is trying to become a destination nightclub certainly does. In general, a great time to lease is when you are a successful business that has hit an earnings plateau requiring major capital expenditures to move in new markets. If your company has a steady flow of business coming in you don’t want to burden that thriving part of your company with huge equipment costs for an untested venture. By leasing equipment rather than purchasing it you can insure your existing business is not disrupted by expansion. In other words, leasing lowers your risk and increases your chance of success.

I was excited to help this business grow but when I processed their equipment leasing application I ran into a common problem: exposure. Not the exposure that you are thinking about, leasing exposure.

What is exposure and how can in impact my business?

All leasing companies set a limit on the amount of money they will loan a particular company based on financial criteria that is often referred to as exposure. Once this limit is established is easy to add equipment onto existing leases or start new leases as long as the “total exposure” is still under the set limit.

The country club was in good financial standing. In fact, eLease had already funded a lease a few months earlier for their new management software. While the new lease request for the limousine was less than the original lease for management software the “total exposure” of both the management software and the limousine was higher than the limit that eLease had set for the company.

Computer based scoring systems that run most leasing companies would have declined the country club instantly for having, “too much exposure.” This highlights two important things to know about leasing. First, work with a leasing company that has a real person looking at every deal. Secondly, find a salesperson that has some equipment leasing experience so they know how to work around some of the common leasing hang-ups.

I was able to prove that the country club had already grown from the time eLease had financed their management software and was continuing to expand. This growth dictated a revaluating the “exposure” limit. When the companies “exposure” limit was adjusted it was increased by enough to lease the limousine. The deal got done, the company is doing well in their new endeavor; all part of a days work.

Used equipment is an excellent way to take advantage of leasing or financing. We recently financed a used 2000 Peterbilt truck for a customer that is a great example of how to make the most out of limited capital.

To begin with, the used truck cost 40% less than a new truck. That is a big savings, even before they calculated how much less they would have to pay upfront by breaking up the payments over a couple of years. We were also able to finance the additional 200,000-mile warranty for the truck. This gave the customer the piece of mind that if anything went wrong with the truck it would be covered in their monthly payment.

There are a couple of things to remember when choosing a piece of used equipment. First make sure the equipment is in good working condition. A lot of companies will lease a piece of used equipment that is exactly like equipment they already own. Smart move.  That way they already know how to operate the equipment and will have a maintenance plan in place to keep the equipment in good working order.

When ever possible get a warrantee. If a warrantee is not offered, which is usually the case with used equipment, take the time to get the equipment looked at by a trained professional to make sure there are no hidden problems an untrained couldn’t see. Particularly when you are leasing the equipment, it is worth the minimal extra cost to ensure you have a good piece of equipment that will last the term of the lease.

eLease is able to finance all kinds of used equipment and recently we expanded our offerings to allow used equipment to be leased regardless of the age of the equipment.  eLease most frequently leases titled vehicles, furniture and fixtures, printing equipment, metal working equipment and others.

In my opinion, there are only two seasons in the snow industry: ski season and preparing for ski season. In the off-season critical decisions are made regarding investments in equipment and capital improvements that are needed to maximize the experience of guests, stay competitive in the marketplace, and upgrade to newer technology. Of course these decisions need to be implemented before the mountain is in its high revenue cycle and cash flow positive.

Ski business or not, the goal of any company is always to maximize cash flow and to match the timing of lease payments with the income being generated by your business and its new equipment. Seasonal trends are common in several sectors including consumer electronics, hotels, restaurants and department stores.

eLease has developed a Snow Resort Financing Program that provides the convenience of seasonal payments, which are ONLY due during when the mountain’s busy season. By matching the payment with the revenue cycle we can maximize your cash flow during the off-season and avoid negative cash flow on equipment. Additionally, seasonal payments give you the advantage of getting a jump on the season. You’ll have your new equipment delivered, installed, and tested months before your first payment is due.

The benefits of leasing equipment become crystal clear when your equipment payment is tied to the revenue stream of your business. I’m not telling you anything new, but traditional financing that requires payments 12 months of the year throughout the term of the lease can be a heavy burden on seasonal businesses. Particularly when you generate nearly 100% of revenue within a 5-month period.

If you’re interested in learning more about our Snow Resort Financing Program or are curious to find out what your monthly payments would be on a snow making purchase, please feel free to contact me. We’d really like to help. Thanks for your interest and have a great season.